The German Economy in December 2017 – record ending to a record year!

As an awesome year drew where record chased record, Germans finally seemed to enjoyed themselves rather than going out on a shopping-spree. At least that is what the incoming figures about retail around Christmas tell us: Despite growing by a healthy three per cent, especially smaller retails seem to be not too happy about their sales figures (cf. here).

Apart from this, the year ended on a rather positive note:

Not, the German DAX, though, who went went further south overall in December, however, only after another roller coaster, leading the German index to 13,312 on 18 December before collapsing to 12,917 points again on 29 December 2017. Hence, it was indeed an interesting end to a year, where the DAX gained around 1,300 points over the year.

Although there are no official numbers on the table yet, German GDP is said to have grown by overall 2.3% in 2017. Again, German exports set the tone: in October 2017 they grew by 6.8% (YoY) alone.

Also, the labor-market played a crucial role in the positive outcome to the year: Even in the (not employment-friendly) month of December, the German unemployment-rate remained at the low level of 5.3% in December 2017, already reached in November, the number of unemployed rising by around 17,000 (MoM) but falling by another unbelievable 183,000 on a YoY-basis, staying again below 2.4m. Needless to say – it is another record.

Although the German inflation-rate slightly decreased again from 1.8% in November to 1.7% in December 2017 (MoM), it reached 1.8% for the whole year – a level not seen since five years. And I guess, this will not change in 2018…

Corporate insolvencies in Germany – after a nearly 10-percent decline in July and “only” –4.3% in August 2017 (YoY) – resumed their “crash” with a vengeance in September 2017 (last available figures), when they lost another -14.2% (!) (YoY). For the first three quarters of 2017, corporate insolvencies were down 8.0% (YoY).

A warning sign, though, might be the German Industrial production, which, after declining by -1.6% in September already, further decreased by -1.4% in October 2017. Also, new orders for November 2017 decreased by -0.4% (MoM).

However, according to German managers, there seems to be no cloud on the horizon: The German (Industrial) Purchasing Managers’ Index (PMI) set another record and rose from 62.5 points in October to 62,5 points in November to another record-breaking 63.3 points in December 2017. The Ifo business climate index slightly decreased from its record of 117.5 points in November to 117.2 points in December 2017. There against, the ZEW Indicator further rose from 88.8 points in November to 89.3 points in December 2017.

All-in-all, 2017 was a fantastic year for the German economy which is running on all cylinders. At the end of the years some signs came up (DAX, industrial production) which could either signal a short breath-taking or trouble ahead. I will monitor the development closely, but would currently agree with most of the forecasters who predict a further “smooth” year for the economy.